Two Florida credit unions, Pen Air FCU and Gulf Winds FCU, both of Pensacola, are on opposite sides when it comes to grappling with card rewards in the face of the coming cap on interchange fees and the impact of overdraft regulation.
The $383 million Gulf Winds is halting its Visa debit card rewards program July 31, warning members on its website that potential undue expense has crippled the offering of such programs and suggesting free checking could be in jeopardy, too.
But in a counter move seen by outsiders as a clever way to garner market share, the $1 billion Pen Air has introduced a new point-based rewards program covering a full product line, including checking, savings and loans.
Pen Air said in offering “Premier Relationship Rewards” it seeks to buck the trend of both local and national banks and CUs which are “cutting back on services or charging additional fees.”
At Gulf Winds, the CU explained that a combination of the opt-in overdraft regulation and the Durbin amendment significantly impacts the ability of Gulf Winds to offer certain benefits including free checking and card rewards.
“In the best interests of Gulf Winds and its membership as a whole,” the Visa program is being discontinued with grandfathered provisions, the credit union said.
“After July 31, you will continue to earn rewards only on Gulf Winds Visa credit card or Mastercard purchases,” said the website. Members, however, can make a switch to the CU’s own credit card and keep getting credit toward rewards, the announcement said.
The CU’s message explained that the current banking climate “and regulatory changes have presented unique challenges to the entire banking industry.” The statement noted press accounts of how financial institutions expect to start charging customers for services that are now free. On that, Gulf Winds pledged “to do everything we can to continue” the CU’s own free checking services.
Pen Air, on the other hand, said the time seemed ripe to offer its program. “Pen Air is pleased to be in a position where we can give back to our members for their loyalty,” said Ron Fields, president/CEO.
One consultant, William Handel, vice president of research at the Chicago-based Raddon Financial Group, maintained that Gulf Winds' move, rather than Pen Air’s, more accurately reflects the current trend of CUs and banks preparing to curtail rewards programs.
Many financial institutions, he said, “are still sitting on the fence waiting on congressional action but the definite trend going forward is to cut back.”